When I was a kid, a popular song referenced a vegemite sandwich. I had no idea what that was for a long time nor did the school dictionary help. When I finally ran into it, I learned real quick what it was and it gave me great into the land “down under’s” palate.
Ag law has its own vernacular and knowing those terms will go a long way towards a successful operation. Let’s take a look at some of the terms of art that the farm operator/ landowner is going to run into. This time we will look at taxes and real estate terms.
Warranty Deed. I own this and when I sign it over to you, I will defend the title against anybody who say otherwise.
Quit Claim Deed. I may or may not have an interest in this property, if I do, here it is. Good luck, don’ t call me when things go south.
Quick Claim Deed. Not a real term. Don’t use it.
Abstract: A history of the property showing ownership, current liens, easements and other items impacting little. Usually updated by the seller of property (or the borrower if refinancing) and then examined by an attorney to establish title and what defects, if any, need to be addressed. The updates don’t last forever, and the abstract must be updated before examination.
Title Opinion. An attorney’s written findings of the examination of the abstract.
Contract Sale. An installment sale where the owner serves as the bank -essentially. The Buyer is in possession as long as they make the payments and if they don’t, they can be removed from title and forfeit all payments. When they complete the payments, they received a deed.
Rent to own: Not a concept. Either you are buying on contract sale or buying with a lump sum of cash (sometimes provided by a bank). While you can enter into agreements that say I am renting for X and if I buy the property then Y out of my X rent payments will reduce the purchase price, those agreements are not suitable for residential purchases and must be carefully crafted.
CSR/CSR2: Corn Suitability Rating. This is based on soil type and is a factor in Iowa land valuation for many. The higher the CSR, the more desirable the ground is for row crop production.
Amortization: a schedule of showing how payments are applied over time.
Appraisal: The value established by a 3rd party professional based on market review and other factors.
Assessment: The value of the property established by the government or its contractors for taxation.
Land Basis. The cost of real estate. Established by how much you paid for it, how much it was worth when you inherited it, or how much the purchaser paid for it before they gave it to you.
Gift. A complete transfer of control and ownership of an asset to another. Taxes are owed by the gift giver if it exceeds certain thresholds. Gifts are not income.
Capital Gain/Loss . Gain- The positive difference between Basis (minus depreciation taken) and sale price of capital assets (land, stock, etc.) . This is subject to federal and state tax based on a scale regarding your other income and your use of the property. If you hold property less than a year it is short term capital gain and that is generally taxed at a higher rate (to discourage churn in the marketplace) than long term capital gains. If you lose money, that is a Capital Loss. Capital Loss is limited as a deduction to $3,000 per year or up to the amount of any capital gain in that tax year. Same rules regarding short term and long-term capital loss.
Depreciation. A tax declaration of a reduction in the basis of a business property to account for its consumption in the course of doing business. This reduces your taxable income to reflect an expense of your operation. If you sell an item that you have depreciated for more than what remains in its value, you can be taxed on the difference as “recapture” as the expense you previously took has been recovered and is now considered income. Different types of assets have different depreciation life spans. Some items can have accelerated or “bonus” depreciation allowing them to be taken as an expense faster than is otherwise normally allowed under the tax code (aka 179 or Bonus). Land does not depreciate.
Deduction: An expense the offsets income. If the expense is made in the pursuit of generation of income, it may be deductible. Expenses incurred as part of everyday living are generally not deductions. Certain categories of living expenses (health care, real estate taxes, charitable giving) may be deduction in some cases.
Itemization. A tax technique where you report your certain items of living expenses to off set income. These itemized deductions are subject to a percentage reduction based off your total income and must generally beat a “standard deduction” that the government allocates to taxpayers to avoid having to review everyone’s itemized deductions.
Recapture. Tax imposed when you depreciate an item and then sell it for more than what the depreciated value is. Example, I have a$5,000 truck that has $3,000 depreciated against it. I sell it for $5,000. I pay recapture on the $3,000. If I had sold it for $2,000. I would have no recapture.
The ESG is environmental, social and governance reporting. This is a concept adopted by large corporations to set standards for how they operate so their end consumers feel good about doing business with them. This can take lots of different forms, from requiring its vendors to avoid excess printing of documents, adopting diversity and inclusion programs, to commitments to stated goals on energy reduction and consumption of more “green” sources.
The idea is to make great soundbites, build brand loyalties and build a better company. The concerns come in when those goals are not made. Were they even attempted? Or was it all a smoke show? Can a consumer sue for the company not living up to its stated ESG goals or policies? For traded companies, the SEC is going to make rules.
How does it impact ag? Ag provides carbon capture, renewable energy, biofuels and conservation practices that corporate America would love to latch on to and say they were involved with it. Farmers already use production data and soil regeneration techniques that can be quantified and laid in spreadsheets in boardrooms and in talking points.
ESG might frame who these companies deal with. The tell if you will. The end purchase of your product or services telling your operation that we are not going to do business with you unless you have an aligned ESG program. Sounds a lot like quality assurance programs farmers are already doing. Here is another example, at least one large ag lender has a policy regarding paper use reduction and waste. That will prevent a large litigation firm who notoriously requires paper copies of all documents and pleadings (to increase litigation costs) from ever doing business together. Pay is the other end from tell. Companies may pay producers who adopt ESG polices a premium to ensure a line of products that meet their ESG goals. Really it is no different than a niche marketing premium like organic, waxy corn, or food grade soybeans.
While I don’t think its coming in 2023, farm operations can plan now on the eventual ask or incentive from the companies where its end product lands. A forward-looking ag operation in northeast Iowa is going to pay attention to Quaker Oats, Tyson, Hormell Cargill and ADM adopt as ESG policies. It probably wouldn’t hurt those same operations to look at the ESG policies of the companies that they do business with. Are green painted tractors made by a company that shares your views, Are blue planters governed by a corporate mission statement that you agree with?
The pet industry is big in the US. We buy cat and dog related retail items for ourselves and the animals. We purchase pet insurance. Vets who work on Fido and Fluffy charge premiums that the large animals would never have spent on them.
It is also, a jumping off platform to stop production. Animal law is broadly animal welfare rules. Rules to protect production animals are deeply rooted in America, by comparison, prior to 1860s nothing made a difference between your favorite dog and a wild one when it came to them being shot by your neighbor. By 1867, New York said starving, torturing, or killing living creatures was a crime. Other laws regulate puppy mills, dog and chicken fighting. Pretty soon, denial of food, water, shelter, and vet care were actionable offenses.
Animal rights is the idea that animals have more than a welfare interest. They can inherit an interest in a trust (which is a good idea if you own an animal that will outlive you like an elephant, certain breeds of birds etc). Wilder ideas that are being pushed are that animals have the right to own land and have humans owe them a duty of care and responsibility to not destroy their habitat. Some ways to get into court for animals are to indicate the human is harmed observing by what is happening to the animal, the animal itself is harmed by the action (like denial of habitat) so the humans bring action for the animals, or more directly, the animal can sue in its own name. The most famous was a case where PETA filed a case for a macaque monkey who hit a button on camera. PETA claimed the monkey owned the copy right to the image. At least under the copy right act of 1976, the monkey didn’t have the right to sue, but the photographer who did own the image had to settle and donate 25% of the revenue from the photo to a macaque protection agency.
Horses, killer whales, and chimpanzees have all been apparently trying to file lawsuits via human intervention in their own name. Why do you care? If they have standing to sue, then animal husbandry practices like artificial insemination are now sexual assault.
In addition to suing, the latest maneuver is to “rescue” (read steal) animals from production faculties and say they are getting care for the animal. They will live cast the act in order to get views and interaction. They try to say the stolen property has no value and that the actions were designed to establish a right to rescue animals in peril. The defendant actually wanted to be jailed and appealed getting suspended jail sentence.
These interests are getting “experts” who are willing to testify that fish can be happy or sad based on the type of environment they are in. That is amazing for the idea that not so much fish might have but that humans are qualified to interpret the display of those emotions through mere observation.
Colorado’s proposed legislation would have also limited slaughter to only after 25% of natural life span had lapsed (for cattle that would be a chewy steak). In Oregon, they attempted to outlaw hunting and slaughter livestock full stop as well as criminalizing the breeding practices of AI. Don’t worry, in Iowa, a file was introduced to ban new confined feeding operations. A similar bill has been proposed on the federal level by Senator Cory Booker. Sen Booker had presidential aspirations at one time.
What about what did pass. Eight states (Nevada, Massachusetts, California, Colorado, Michigan, Oregon, Utah and Washington) require all eggs sold to be from cage-free facilities. Restrictions on housing types are also on the books. Largely in states that don’t actually produce the regulated egg or chicken.
I wish I was making this stuff up. I wish this wasn’t a funded effort. This article didn’t even cover California’s efforts to tell producers in other states how to raise livestock.
Back to the drawing board: Peeping Tom law help torpedo anti Trespass and record law. Okay, its more than that.
For the third time, the Federal courts have found Iowa farm trespass law to be unconstitutional. Iowa Code § 727.8A made trespassers who and “knowingly places or uses a camera or electronic surveillance device that transmits or records images or data while the device is on the trespassed property” an aggravated misdemeanor. That’s up to 2 years in prison. Simple trespass is more like a fine.
The objecting party was the Animal Legal Defense Fund. They admitted in their court filing that they haven’t recorded yet, but this would prevent them from trespassing and recording in the future. Weird way to say we plan on breaking the law later, but we don’t want to be in more trouble that we would have been under the old law. The federal court said that was enough to give them a “chip and chair” to proceed. (For the law students in the room, standing was the issue).
It’s private property so no first amendment applies was the defense. However, because the state of Iowa waded in and made it a criminal issue, the court said the first amendment applies. So that issue did not save the day for the defense.
Also, it’s a not a free speech issue said the producer groups because the recordings only become protected speech once they are edited or distributed. The federal court found the recording was also part of free speech (in line with some earlier holdings) so this defense fell flat.
With those barriers broke, the last line of inquiry is, can the government do this anyway? The parties did agree that “intermediate scrutiny” is the standard. That means that government wins if it shows that it thought about and couldn’t use less restrictive ways to achieve its specific governmental interest. The court found that the other Iowa laws on peeping toms and invasion of privacy already criminalize recordings and this law was too broad to achieve the government’s desire.
This is not the first rodeo on this topic. The State started in 2012 with penalties for lying about why somebody was on a farm as an employee (deceptive practices to gain access Iowa Code 717.3A).
Since 2012, the Iowa Legislature has enacted several agricultural fraud and trespass laws. The laws, sometimes referred to as “ag-gag” laws, make it a crime to use fraud or deception to gain access to or employment at an agricultural facility. The Ag gag law was partially dismantled by the federal court.
So, Iowa tried again, and criminalized those who trespass on ag facilities intending to do harm or lying to gain access via employment for non-employment reasons. The federal district court said no, again. That issue is on appeal.
Then Iowa tried a new trespass take, calling it “food operation trespass”. That has survived the first test in Federal district court and is still standing. In 2021, they made it criminal to interfere with livestock transport, unauthorized sampling, and another camera law.
Iowa is not in a vacuum doing all this alone. North Carolina, Idaho, Wyoming, Utah, Arkansas and Kansas have all promoted similar laws to provide producers protections. What is a livestock producer to do? First, make sure your operation and your employees are following proper husbandry and animal practices that promote animal wellbeing. Employees should be encouraged and rewarded for reporting variations from the standard. Unless your operation enjoys unannounced visitors, maintain a locks, video surveillance, signs restricting access, and monitor operations sights. Part of this fight is people getting access to facilities to either document problems or create them. You can control the first one, the second one is only controllable to the extent of who you invite into your operation.
Sumner, Iowa Attorney practicing in Iowa primarily in Ag Law, Bankruptcy, Estate Planning, Real Estate Law. Lawyers at the Dillon Law P.C. are dedicated to serving Iowa, including but not limited to the cities of Allison, Charles City, Cresco, Decorah, Des Moines, Dubuque, Elkader, Grundy Center, Independence, Manchester, New Hampton, Waterloo, Waverly, Waukon, West Union & Vinton, and the communities that make up Allamakee, Benton, Black Hawk, Bremer, Buchanan, Butler, Chickasaw, Clayton, Delaware, Dubuque, Fayette, Floyd, Grundy, Howard, Polk, Winneshiek, counties. © 2023 Dillon Law P.C. Sumner Location | 209 E. 1st Street, Sumner, IA 50674 Volga City Location | 502 Washington St, Volga City, IA, 52077. West Union Location | 103 N. Vine Street, West Union, Iowa 52175 West Union, Iowa 52175 We are there most Fridays 10-3 and by appointment. Telephone: (563) 578-1850 Email: firstname.lastname@example.org Home | Attorneys | Blog | Ag Law | Bankruptcy | Estate Planning | Real Estate Law | Contact | Iowa Ag Law Attorney Sumner Taxation Commercial Transactions Production Contracts Labor Hobby Farm Liability Bremer Fayette County Lawyer